Ethnics Outspend in Areas

Consumer goods marketers who wonder where their growth will come
from in the future should explore multicultural markets. While
sizable population increases among non-whites are a given, many
marketers haven't awoken to ethnic buying-power growth.

The New America Marketbasket Index points out that household
expenditures among multicultural families will grow faster than
white households. The study, developed by New America Strategies
Group and DemoGraph Corporation, looked at 13 different key areas
of consumer spending, such as entertainment, clothing, vehicle, and
home purchases, by race. It offers projections from 1995 to 1998
based on purchase behavior trends from 1992 to 1995.

The Index documents the accelerating purchasing power, financial
strength, and upward mobility of African, Asian, and Hispanic
Americans consumers by analyzing household spending, and tracks
their per-household spending growth based on a weighted average of
multicultural household expenditures compared to that of white
households.

In 10 of the 13 categories, minorities posted stronger growth
than white households. Only in restaurant expenditures, public
transportation, and rent did white growth exceed that of
minorities. Expenditures from multicultural households exceeded
white households in five categories-groceries, entertainment,
personal care products, clothing, and education.

Why the greater increases from minorities? Laura Teller, chief
executive officer of Miami-based DemoGraph, attributes it to a
strong economy, near full employment, and minorities having more
money to spend. "A rising tide lifts all the ships," she said. "The
economic expansion has more money flowing into those
communities."

"Grocery and clothing expenditures are higher due to the size of
the households," Teller said, citing the fact that minorities have
more family members in average households. Multicultural households
also have more people contributing to the family income, especially
in Hispanic homes, she added.

The study projected Asian Americans to increase average spending
17.7 percent from 1995 to 1998. African Americans were close behind
at 17.6 percent, while Hispanic expenditure growth was 15.5
percent. Whites, meanwhile, spent only 13.7 percent more over the
three-year period.

DemoGraph projected expenditure increases through extrapolating
data from the 1995 U.S. Consumer Expenditure Survey, U.S. Center
for Educational Statistics, the National Auto Dealers Association,
and the Harvard Joint Center for Housing Studies. The company
didn't factor out inflation since it believed that it affects all
groups equally.

While some of the gains occur in smaller-ticket items, such as
groceries and clothing, multicultural families tend to outspend
whites in more expensive goods, such as cars and homes. Minorities
plan to increase spending on vehicles by 37.2 percent, while growth
for whites is about 13.4 percent between 1995 and 1998. Minorities
will boost their spending on home ownership by 16.9 percent,
compared to 12.4 percent for whites. The study said 40 percent of
all first-time home buyers between 1995 and 1998 are multicultural
consumers.

"Multicultural families are becoming part of the burgeoning
middle class," Teller said. "Their first purchase is a car, and
they also have a high desire to own their home."

Most of the expenditure increase from African Americans can be
attributed to increased spending on clothing, entertainment, and
health care. Hispanics are expected to have large increases in
vehicle purchases, clothing and entertainment, while gains in Asian
expenditures are in restaurants, vehicles and education. Whites
spent more of their dollars in restaurants, clothes and public
transportation.

For several demographic categories, expenditures on rent are
expected to decline, due to those families moving into their first
homes. Spending by African Americans on rent is projected to
decline 13 percent, and 20.2 percent for Hispanics. Both whites and
Asian Americans plan to increase average spending for rent by 6.3
percent. African Americans are expected to decrease spending on
public transportation.

"Multicultural consumers are purchasing the good life," Teller
says. However, an economic recession could definitely curb
spending. Teller said that while Asian Americans save more than
other minorities, African Americans and Hispanics have a smaller
savings and income cushion if the economy falters. "Losing jobs
would be a big shock to their systems," Teller says.